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                                                       Before the
                         FEDERAL COMMUNICATIONS COMMISSION
                              Washington, D.C.  20554
  
  
  
  In the Matter of                   )
                                     )
  National Exchange Carrier Association, Inc.       )    ASD 99-43
  Proposed Modifications to the 1999-2000      )
  Interstate Average Schedule Formulas         )
  
  
                                      ORDER
  
  
       Adopted:  December 28, 1999             Released:  December 29, 1999  
  
  
  
  By the Chief, Accounting Safeguards Division, Common Carrier Bureau:
  
  
                      I.  Introduction
  
       1.   On October 1, 1999, the National Exchange Carrier Association, Inc. ("NECA")
  filed proposed modifications to the current universal service formulas for average schedule
  companies.  These formulas, which under NECA's proposal would take effect on January 1, 2000
  and remain in effect through December 31, 2000, include a local switching support formula and a
  universal service fund ("USF") expense adjustment formula.  On October 7, 1999, the Accounting
  Safeguards Division issued a public notice soliciting comments on the NECA filing.  Two parties
  filed comments.  As discussed below, we approve NECA's modified local switching support
  formula.  Regarding the USF expense adjustment formula, however, further review of NECA's
  proposed revision to the USF expense adjustment formula is necessary.  Until this review is
  complete, we direct NECA to retain the current USF expense adjustment formula.
  
                      II.  Discussion
  
       2.   Local Switching Support Formula.  The local switching support formula is used
  to determine the amount of support for switching costs that will be provided from universal service
  support mechanisms.  The current interstate local switching support formula was approved on
  December 22, 1998.  NECA proposes minor modifications to the current local switching support
  formula which, if approved, would increase the local switching support for average schedule
  companies by approximately $240,000 per month.  We have reviewed NECA's proposed changes
  to this formula and find it consistent with our requirements.  We therefore approve it.  
  
       3.   USF Expense Adjustment Formula.  The current USF expense adjustment formula
  is the result of an Order dated March 17, 1999, directing NECA to retain the USF expense
  adjustment formula approved in June 1998, adjusted to reflect the growth in average schedule
  companies' working loops and to ensure no carrier's support would be unreasonably reduced.  In
  adopting the current USF expense adjustment formula, we rejected modifications proposed by
  NECA because we found that NECA's proposed formula did not reasonably approximate the cost
  per loop of sample average companies, and resulted in estimated costs per loop that were widely
  disparate from the actual costs per loop of the sample data. 
      
       4.   NECA's proposed modifications in the instant proceeding raise the same concerns
  that led us to reject NECA's previous proposal.  For instance, under NECA's proposed formula,
  the USF expense adjustment increase for average schedule companies would be
    substantially greater than the increase in the growth of loops for these companies. Further review
  and examination of NECA's proposed modifications to the current USF expense adjustment
  formula is necessary before we can determine whether revisions are warranted.  To maintain
  stability in USF expense adjustment payments to average schedule companies while we complete
  our review, we direct NECA to retain the current USF expense adjustment formula as set forth in
  the March 1999 Order.  Our review will proceed expeditiously so that any revised formula, if
  appropriate, will be implemented promptly.
  
                               III.  Ordering Clause
  
       5.   Accordingly, IT IS ORDERED, pursuant to Sections 0.91 and 0.291 of the
  Commission rules, 47 C.F.R.  0.91, 9.291, that the average schedule formula proposed by the
  National Exchange Carriers Association, Inc. on October 1, 1999, for local switching support
  SHALL BECOME EFFECTIVE January, 1 2000.
  
       6.   IT IS FURTHER ORDERED, pursuant to Sections 0.91 and 0.291 of the
  Commission rules, 47 C.F.R.  0.91, 9.291, that the current universal service fund expense
  adjustment formula approved by the Commission on March 17, 1999, SHALL REMAIN IN
  EFFECT January 1, 2000.
  
       7.   IT IS FURTHER ORDERED, pursuant to Section 4(i) of the Communications
  Act of 1934, as Amended, 47 U.S.C.  154(i), and Sections 0.91 and 0.291 of the Commission's
  rules, 47 C.F.R.  0.91, 0.291, that THIS ORDER IS EFFECTIVE UPON ITS RELEASE.
  
  
                           FEDERAL COMMUNICATIONS COMMISSION
                           
  
  
                           Kenneth P. Moran
                           Chief, Accounting Safeguard Division